Non-compete and non-soliciting agreements contain complex legalese, and it’s important to understand the fine print and language of these clauses so you don’t get stuck in a contract you don’t want.  You might be tempted to gloss over important phrases, but be aware that these agreements may impact your future and your relationships with your clients.  If you are considering signing an agreement or have already signed an agreement, you should always seek legal counsel to best understand your rights and options. At Bridgemark, our financial advisor consultants have worked with hundreds of advisors over the years.  Many advisors have had some variations of these agreements and we are here to provide invaluable guidance.

Understanding the Fine Print of Financial Agreements

Non-Solicit Agreements

Non-Solicit agreements are contracts that govern an advisor’s right to solicit or recruit clients of the business after employment. These agreements are meant to protect a business from losing clientele to former employees or other financial advisory firms. Non-solicit agreements are the most prevalent clause and, while there are some industry accepted ways to talk to clients of a former firm, these agreements are enforceable. It’s always important to seek legal council to understand how a non-solicit clause applies to you, as the enforcement depends on the language in the agreement and state by state laws.

As a note, when switching from one protocol firm to another, the non-solicit clause is typically waived.

Non-Compete Agreements

Non-compete agreements are similar in that these agreements prevent terminated financial advisors, or those who voluntarily depart the firm, from capitalizing on client lists, trade secrets, data and other advantages obtained while working for the original employer. These agreements are written to prevent an advisor from competing with another financial advisory firm within a certain number of miles from his or her original firm. These agreements are not as predominate as non-solicit, but they can still be enforced in a court of law. Always seek legal advice for specific questions about your non-compete clause.

Non-Accept Agreements

Non-accept agreements are primarily used in the RIA space. They can be thought of as expanded non-solicit clauses and these agreements typically attach damages clauses to the contract. A damages clause means that when you move firms and a client agrees to work with you, you owe damages to your former firm. This agreement is typically more restrictive and greatly limits who an advisor can work with.

As a financial advisor, it’s important to recognize these agreements and understand the legally binding fine print before signing a contract.

Navigating Non-Solicit and Non-Compete Agreements

These clauses exist to add protection to financial advising firms, but as an advisor it’s your job to understand what they mean for you.It can be tempting to accept a contract with the first firm you find, but always be aware of these clauses, how they’re written, and how they might restrict your future in advising.

When you do look for a financial advising firm to work for, it’s always important to look over the company and consider what is best for you and your business. Before you sign, weigh the pros and cons of what the firm can do for you, and how the language in the contract is written. Going to a consultant like those at Bridgemark can help you understand all your choices and walk you through different firms so you choose the best firm for your business and clients. The last thing you want to do select a firm that will end up hurting you more than it’ll help.

If you have already signed a contract with a firm, that doesn’t mean you have no options. Many advisors have been able to change firms and have found success with new providers. Depending on the language of your agreement, there may be ways to continue to work with your clients while following the language of the agreement. While legal advice is an important step, Bridgemark’s consultants are also here to help you determine the next course of action if you’re unhappy with your firm.

There may be options still available even if you have signed an agreement.  For example, most non-solicit agreements restrict an advisor from soliciting their former clients, but it doesn’t restrict client’s ability to contact their advisor.

Bridgemark Strategies’ Consultants are on Your Side

The nuanced subtleties of the language used financial advisory firm’s non-solicitation, non-accept and non-compete agreements is often legally binding, and it can be difficult to decide what is best for you and your business. Our business consultants can be a first step to understanding your options if you are interested in changing firms.

Reach out to us today to find out more about how we can help you find success.